DashoVidya IAS–Syllabus Affairs

Economy (January, 2022)

TOPIC – Effects of Neoliberalisation

Issue in brief – The “property” rights and its encounters with evolving ideas of “human” rights
over the last three centuries.
https://www.thehindu.com/todays-paper/tp-opinion/liberal-economics-creates-illiberal-
societies/article38269921.ece

Where in Syllabus:
GS 3: Economic development

❖ How the world economy has failed in creating an egalitarian society?

• The Economies across the globe are not doing well and most of the benefits of growth are being
sucked up to the 1% on the top.
• ‘Trickle down’ effect is diminishing as we move downwards in the economic sections.
• With every global crisis like the financial crisis of 2007-08 and the ongoing COVID-19 crisis, the
economic divide between the rich and the poor is getting wider.
• Inequalities of wealth have increased around the world and India is becoming one of the world’s most
unequal countries.
• A surging tide of nationalism and authoritarianism has imperiled democracy globally, and within
presumptively democratic nations.

❖ How the extremes of Capitalism and Communism has crippled the well-being
of nations?
Communism
• Communism had lifted living standards, and the health and education of masses of poorer people
faster than capitalism could.
• However, communism’s solution to the “property” question, that there should be no private property
— was a failure. It deprived people of personal liberties.
Capitalism
• Capitalism’s solution to the property problem; replacing all publicly owned enterprises with privately
owned ones has not worked either.
• It has denied many of their basic human needs of health, education and social security, and equal
opportunities for their children.
• The private property solution has also harmed the natural environment. The belief that private owners
will husband natural resources sustainably for all has proven false.
• When natural resources, and knowledge converted into “intellectual property”, they become the
property of business corporations. Which is then used to increase the wealth of its owners, the
ecological commons are harmed, and social equity suffers.

❖ What are the major concerns?

Political: weakening of democracy and secularism
• Governments are hamstrung without resources to provide public goods, hence they take the easy path of
selling off public enterprises to raise funds.
• With not enough in the present, and receding hopes of better conditions in the future, people lose faith in
their governments.
• Whenever hopelessness spreads in societies, they are fertile grounds for religious and spiritual exploitation
creating identity crisis and turning into an issue of pride among citizens. All these are more than enough
to distract them from their actual woes.

DashoVidya IAS, email id: dashovidya.upsc@gmail.com; Telegram: https://t.me/DashoVidyaIAS 1

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 DashoVidya IAS–Syllabus Affairs
Economy (January, 2022)
• Liberals who continue to advocate for more liberal economics must understand how their ideas have
caused the rise of anti-liberal societies and governments which they lament. They can no longer have
their cake and eat it too.
Economic: inequities within economies and an unsustainability of economic growth
• Economic despair is feeding the rise of authoritarianism, nationalism, and identity politics.
• ‘Privatisation’ of everything became an ideological imperative in economics by the turn of the century.
Though it justifies the increased efficiency in delivery of services, it sets aside ethical questions of equity.
• With higher taxes until the 1970s, most of the western countries had built up their public health and
education infrastructure and strengthened social security systems. But today the rich are being taxed
much less than their capability.
• Opening national borders to free trade became an ideology in economics in the last 30 years.Taxes of
incomes and wealth at the top were also reduced. The ideological justification was that the animal spirits
of ‘wealth creators’ must not be dampened.

❖ What situations emerged due to “property rights”?

• In proprietarian societies, it is just that he who owns more must have a greater say in the
governance of the enterprise.
• When ‘public’ is converted to ‘private’, rich people can buy what they need. In fact, they can buy
more with their higher incomes even if the services become more expensive — better health care as
well as better education for their children at the world’s best schools.
• The children of wealthier people with better education have greater access to opportunities in the
future also.
• Democratic and capitalist principles were becoming reconciled with “socialist” ideas in Europe and
the U.S. after the World Wars, and in developing countries such as India after the collapse of
colonialism.
• The socialist era ended with the collapse of communism and the resurgence of neoliberal economics
around the world afterwards. Climate change and political rumblings around the world are both
warnings that capitalism needs reform.

❖ What is critical to understand?

• Historians suggested that with the collapse of the Soviet union, the idea of totalitarian governments as
saviours of the people had been debunked; and the idea of public ownership of property, had failed.
• However, history has returned. Authoritarian governments are now being democratically elected by
people seeking a way out of the morass.
• The U.S., the leader of the Cold War against the Soviets, built the “Washington Consensus” around a
starkly “unsocialist”, capitalist ideology which swept across erstwhile socialist countries of Europe and
India too.
• Socialism seems to be back in U.S. politics now with Bernie Sanders, Elizabeth Warren, and young
Democrats. U.S. still being the world power have immense influence on the dynamics of the world politics,
including India.
• The socio-political and economic pathologies are inter-related in reducing the gaps between the haves
and the have-nots.
• Liberals who continue to advocate for more liberal economics must understand how their ideas have
caused the rise of anti-liberal societies and governments which they lament.

❖ How the path for the future should be carved?

• A new form of ‘Gandhian’ democratic socialism powered by cooperative economic enterprises
is required to create a new humanitarian and environment friendly economy.
• Economic policies must be based on such new ideas in the 21st century, to create wealth at the
bottom, and not only at the top.

DashoVidya IAS, email id: dashovidya.upsc@gmail.com; Telegram: https://t.me/DashoVidyaIAS 2

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 DashoVidya IAS–Syllabus Affairs
Economy (January, 2022)
• Thought leaders and policymakers in India must lead the world out of the rut of ideas in which it
seems to be trapped.
• Principles of human rights must not be overpowered by property rights. In truly democratic
societies, human rights must prevail, and every person, billionaire or pauper, must have an equal
right to determine the rules of the game.

Basic terms/ related concepts and facts:

• Washington Consensus: The Washington Consensus refers to a set of free-market economic policies supported by
prominent financial institutions such as the International Monetary Fund, the World Bank, and the U.S. Treasury.
A British economist named John Williamson coined the term Washington Consensus in 1989.
• Liberalization: refers to lessening of government regulations and restrictions for greater participation by private
entities.
• Neoliberal economies: Neoliberalism is contemporarily used to refer to market-oriented reform policies such as
"eliminating price controls, deregulating capital markets, lowering trade barriers" and reducing, (especially
through privatization and austerity) state influence in the economy.
• Capitalism: an economic system in which private actors own and control property in accord with their interests,
and demand and supply freely set prices in markets. The essential feature of capitalism is the motive to make a
profit.
• Socialism: an economic and political system where workers own the general means of production (i. e. farms,
factories, tools, and raw materials). This can be achieved through decentralized and direct worker-ownership or
centralized state-ownership of the means of production.
• Communism: political and economic doctrine that aims to replace private property and a profit-based economy
with public ownership and communal control of at least the major means of production. It is an extreme form of
socialism.
• Privatization: the transfer of publicly owned or publicly operated means of production to private ownership or
operation. The argument for this transfer is usually that privately run enterprises are subject to the discipline of
the market and therefore they will be more efficient.

Practice questions –
Prelims:

Q. Which of the following best describes “Neoliberalism”?

a) Market-oriented reform policies such as "eliminating price controls, deregulating capital
markets, lowering trade barriers" and reducing state influence in the economy.
b) Political and economic doctrine that aims to replace private property and a profit-based
economy with public ownership and control of the major means of production.
c) An economic and political system where workers own the general means of production.
This can be achieved through decentralized and direct worker-ownership of the means of
production.
d) A new form of ‘Gandhian’ democratic socialism powered by cooperative economic
enterprises to create a new humanitarian and environment friendly economy.
Answer: a

Mains: (Level-Advance)
Q. Communism and proprietarian capitalism carried too far have both failed. Comment.
(10Marks, 150 words)

DashoVidya IAS, email id: dashovidya.upsc@gmail.com; Telegram: https://t.me/DashoVidyaIAS 3

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